A Constitutional Review of the Draft ‘Macron’ Law Introducing Shareholder Eviction under French Law: The Revolution that Didn’t Happen

In a politically controversial attempt to modernize the French economy, French Minister of the Economy Emmanuel Macron had passed a sweeping law earlier this year, reforming many areas of French business law, including bankruptcy law. For the first time under French law shareholder removal from decisionmaking will be available for decisions affecting the future of a distressed company. This law is a step in the right direction to force shareholders to absorb the company’s losses and allow new shareholders to invest fresh money.

Unfortunately, the French government failed to use modern, world-class economic standards to govern a shareholder removal under the new law. First, by retaining an antiquated trigger of liquidity crisis instead of actual insolvency, the law fails to consider the enterprise value of the company as the proper economic basis to recognize that shares have become worthless, an essential element to provide legitimacy for their removal. Second, by requiring that a judge justify their removal by finding a “public necessity” to avoid a risk of “serious loss to the economy”, the law offers a weak constitutional safeguard for property rights, a loosely defined public interest standard, and little guidance for a judge to avoid arbitrary decisions and political pressure. This lack of economic and conceptual basis has unfortunately transformed a genuinely potentially useful attempt to reform French law into an inadequate and possibly even unconstitutional new law.

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The Harvard Law School Bankruptcy Roundtable promotes dissemination of academic and practitioner views of current bankruptcy issues, via weekly posts targeting issues of interest, typically linking to a more extended analysis elsewhere. For inquiries and comments, please contact us at bankruptcyproject@law.harvard.edu.